Fitbit Inc: What’s Next for FIT Stock?

fitbit stockFIT Stock Problems Still Persist

Fitbit Inc (NYSE:FIT) stock took a beating as the company provided soft guidance for the holiday season in the third-quarter earnings announced in early November.

Fit stock has lost a little over 75% this year, which is an indication of lots of troubles for the company. However, here’s a piece of encouraging news for the maker of fitness trackers.

FIT stock gained seven percent on Tuesday, following the news that Fitbit devices turned out to be popular gifts over the Christmas weekend. As per media reports, the “Fitbit” app rose to be No. 1 among free apps on Apple Inc.’s (NASDAQ:AAPL) “iOS” app store on Sunday, which suggests that  Fitbit’s products were quite in demand on Christmas. (Source: “There must have been a lot of Fitbit trackers under the Christmas Tree,” Recode, December 25, 2016.)

The other top spots were filled by apps not associated with Christmas presents such as “Snapchat,” “Super Mario Run,” and “YouTube.” 

This is a much needed breath of fresh air for Fitbit stock, which had been pounded earlier due to its supply constraints surrounding the “Fitbit Flex 2.”

Fitbit stock is trading at around $7.40 at present, which is way below its 52-week high of $30.96. Part of the reason has to do with the poor performance of the company, and the other is that the whole wearable market itself has not been doing well. As per the research by eMarketer, Inc., wearables like the “Apple Watch” and Fitbit were expected to grow more than 60% year-over-year from 2015 to 2016.

However, the firm is now cutting that estimate down to just 25% growth this year. The reports said that smartwatches in particular have failed to impress customers. (Source: “U.S. wearables market is doing much worse than expected,” Tech Crunch, December 21, 2016.)

Wearable devices have struggled to gain traction beyond early adopters, and consumers struggle to find reasons to buy smartwatches. eMarketer analyst Nicole Perrin said, “Without a clear use case for smart watches—which have more features than fitness trackers, but significant overlap with smartphone functionality—the more sophisticated, expensive devices have not caught on as quickly as expected.”

Moreover, concerns have come up around Fitbit’s bloated “Charge 2” inventory, as pointed out by Pacific Crest Securities analysts. The analysts said that Flex 2 demand was disappointing. (Source: “Fitbit Holiday Inventory Levels Need to Slim Down: Pacific Crest,” TheStreet, December 21, 2016.)

Fitbit has not been able to meet investor expectations, and there are challenges surrounding the market for its products. The company has just acquired smartwatch maker Pebble and it remains to be seen how this would help it in getting over its growth problems. Until then, Fitbit stock is likely to be under constant pressure.